Weekly equity sentiment poll (3 Oct 16)

The results for the weekly equity sentiment poll are in and there are a couple of interesting trends worth pointing out.  As a reminder the weekly equity sentiment poll uses twitter polling and distinguishes between bullish and bearish on equities for fundamental vs technical rationale.

To start with, the above chart shows the trend for each of the 4 options in the poll (bullish or bearish and based on fundamentals vs technicals). Compared to the equity sentiment poll for last week this week saw less bears on both technicals and fundamentals reasoning, with increases seen in bullish on fundamentals and in particular bullish on technicals – bringing that index above the previous peak.

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Looking at the overall bulls-bears spread, it improved again this week to just below the previous high (week of 4th September). While it has made a strong overall recovery off survey lows at the market low it’s probably not quite at the point where you would start thinking about taking contrarian sell signals from it (unless you think the market is in a downtrend). As I wrote in this week’s S&P500 ChartStorm I think the coming week will present an important test for markets.

Below are the 4 supplementary charts showing the bull bear spread specifically for “fundamental analysis” rationale and “technical analysis” reasoning.  Also included is the technicals vs fundamentals spread (a gauge of whether technicals or fundamentals are driving the predominant view), and for good measure the number of respondents.

The most notable standout is the steady decline in the fundamentals bulls/bears spread, this reflects both a decline in bulls and increase in bears.  It is interesting that this indicator had been declining into the recent selloff.  However what’s also interesting is the rebound this week – while it’s had many “rebounds” it will be informative if this one starts to turn up.  If this is representative of the wider sentiment (which I think it is) then the market is setup to be surprised if the fundamentals improve.

Also worth commenting on is the sharp improvement in the technicals bull-bear spread (an 8 week high). A bullish bias on technicals with scope for surprise on fundamentals could drive the market higher.

Bottom line:  This week saw a slightly more bullish tone overall, but pessimism remains on fundamentals.

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Topdown Charts: "chart driven macro insights" Based in Queenstown, New Zealand, Topdown Charts brings you independent research and analysis on global macro themes and trends. Topdown Charts covers multiple economies, markets, and asset classes with a distinct chart-driven focus. We are not bound by technical or fundamental dogma, and instead look to leverage any relevant factor to capture the theme. As such, here you will find some posts that are purely technical strategy, some that just cover economics and data, and some posts that use multiple inputs to tell the story and identify the opportunities. Callum Thomas Head of Research Callum is the founder of Topdown Charts. He previously worked in investment strategy and asset allocation at AMP Capital in the Multi-Asset division. Callum has a passion for global macro investing and has developed strong research and analytical expertise across economies and asset classes. Callum's approach is to utilise a blend of factors to inform the macro view.